Archive for the ‘Tax Fraud’ Category

False Checks, Trusts, and Ignoring Taxes Lead to Real Prison

Sunday, March 9th, 2014

Perhaps Michael Williams subconsciously wanted to go to ClubFed. He sure did just about everything he could to make sure he did. Let’s run down the list of things he did.

First, have a business that makes money and not file tax returns. Check.

Next, set up trusts that don’t file tax returns. Check.

Let’s add some bank fraud. How about creating phony US government checks and trying to deposit those. Not only is that bank fraud, but it’s probably some other felonies. Check.

And then let’s target the state officials and judges who are involved in state investigations. Let’s refer them to the IRS. That will get them. (No, it didn’t.) The IRS won’t care about that. Check.

(Here, I should point out that this likely got a separate agency involved: TIGTA, the Treasury Inspector General for Tax Administration. TIGTA is the internal affairs department of the IRS, and phony criminal referrals would likely get referred to TIGTA rather than IRS criminal investigation.)

Mr. Williams, a resident of Colorado, was indicted in 2012. He was found guilty on November 5, 2013 after a six-day trial. It took the jury just three hours to find him guilty of tax evasion, currency structuring, bank fraud, and interfering with internal revenue laws.

US District Court Judge Linda Arguello called Mr. Williams “a danger to the community…[He] is continuing to show his contempt for the government and he appears to believe he is exempt from the laws of the United States.” He received 71 months at ClubFed to think things over.

Former Chairman of Woodland Park, NJ Democratic Committee Bribes His Way to ClubFed

Sunday, March 2nd, 2014

The IRS has its problems, but accepting bribes isn’t one of them. The former chairman of the Woodland Park, New Jersey Democratic Committee found that out the hard way.

Michael Kazmark didn’t pay his 1997-2005 federal taxes; he owed just under $100,000 (including interest and penalties) by 2010. When you owe a large amount and cannot pay one avenue that’s open to you is an Offer In Compromise (OIC). In an OIC, you ask the IRS to settle your debt for pennies on the dollar. About 15% of OICs make it through and are accepted; it usually takes over a year for the process to play itself out. Mr. Kazmark offered to pay $48,800 of the $98,046 he owed; he sent the required deposit of $9,800 with his OIC application.

Mr. Kazmark wanted to make sure his OIC went through. Now, most of us might consult with a tax professional who could make sure the OIC had the best chance of being approved. Mr. Kazmark had another idea: bribery. From the Information in his indictment:

5. It was part of this bribery scheme that on or about October 5, 2010, in Passaic County, defendant MICHAEL KAZMARK offered, promised to make and made a $1,000 bribe payment to UC1 and UC2 in exchange for their official assistance in transferring MICHAEL KAZMARK’s offer in compromise file to UC2 so that UC2 could accept defendant MICHAEL KAZMARK’s April 18, 2010 offer in compromise.

6. It was a further part of this bribery scheme that on or about October 5, 2010, in Passaic County, New Jersey, defendant MICHAEL KAZMARK offered and promised to make a $17,500 bribe payment to UC1 and UC2 in exchange for their official assistance in accepting defendant MICHAEL KAZMARK’s April 18, 2010 offer in compromise, and thereby resolving defendant MICHAEL KAZMARK’s federal tax liability, for the amount of the check that he had already paid to the IRS, namely $9,760, as opposed to the $48,800 that defendant MICHAEL KAZMARK had initially offered.

Mr. Kazmark pleaded guilty last year; he was sentenced on Friday to two years at ClubFed. He was lucky in that federal sentencing guidelines suggested a three-year term. In any case, bribery is a strategy that is a very poor choice.

California State Senator Ron Calderon Indicted on Bribery & Tax Charges

Sunday, February 23rd, 2014

This hasn’t been a good year for Democratic state senators in California. Back in January State Senator Roderick White of Inglewood was convicted of five counts of voter fraud, two counts of perjury, and one count of filing a false declaration of candidacy. His sentencing is scheduled for March. This past week State Senator Ron Calderon of Montebello was indicted in a bribery scandal.

Senator Calderon is accused of 24 counts, including mail fraud, wire fraud, honest services fraud, bribery, money laundering and conspiracy to commit money laundering, and aiding in the filing of a false tax return. From the Department of Justice press release:

The indictment describes a scheme in which Ron Calderon allegedly solicited and accepted approximately $100,000 in cash bribes – as well as plane trips, gourmet dinners and trips to golf resorts – in exchange for official acts, such as supporting legislation that would be favorable to those who paid the bribes and opposing legislation that would be harmful to them. The indictment further alleges that Ron Calderon attempted to convince other public officials to support and oppose legislation.

Another part of the press release states that Senator Calderon took bribes from Michael Drobot. Mr. Drobot used to own Pacific Hospital in Long Beach. The press release goes on to note,

Drobot allegedly bribed Ron Calderon so that he would use his public office to preserve this law that helped Drobot maintain a long-running and lucrative health care fraud scheme…

In another case filed this morning in United States District Court, Drobot has agreed to plead guilty to charges of conspiracy and paying illegal kickbacks. In his plea agreement, Drobot admits paying bribes to Ron Calderon.

We also have the wonder of film credits coming into the picture. Film credits have been a magnet for corruption; such was allegedly the case here:

In another part of the bribery scheme, Ron Calderon allegedly solicited and accepted bribes from people he thought were associated with an independent film studio, but who were in fact undercover FBI agents. Ron Calderon solicited and accepted bribes in exchange for supporting an expansion of a state law that gave tax credits to studios that produced independent films in California.

Mr. Calderon is facing a maximum of 396 years at ClubFed if found guilty on all charges.

Tax on the Run Owners Run to ClubFed

Sunday, February 16th, 2014

Here’s a scheme for you: The government has set up this new tax credit worth thousands of dollars. What if we find some impoverished individuals, have them fill out tax returns claiming this credit, and we pocket all that cash? We’ll just phony up some other parts of the return to make it look real. They’ll never catch us!

As an aside, this sort of thing happens with all refundable tax credits. It’s one of the reasons why they attract fraudsters like moths are drawn to bright lights.

Yes, this really happened…except for the part about never being caught. Jason Altman, his brother Jarrod, and Emanuel Harrison owned Tax on the Run, a tax preparation business in Dallas, Texas. They got the bright idea about the First Time Homebuyer’s Credit and did recruit individuals to file tax returns for the credit. They invented Schedule C’s (sole proprietorships) for those individuals so it looked like they made money (enough to afford a house) and then added in the homebuyer’s credit. Amazingly enough, all of those returns had refunds. They also had these clients obtain refund anticipation loans. Once the loan was approved, they drove the taxpayer to a check cashing business where their refund check was cashed. The members of the conspiracy took most of the money. None of the clients qualified for the homebuyer’s credit.

Jason Altman and Emanuel Harrison had already received 7 years at ClubFed. Jarrod Altman was luckier: He received eight months of home confinement as part of three years of probation on Friday. The trio used intermediaries to recruit impoverished taxpayers; the intermediaries are also heading to ClubFed. Everyone involved must also make restitution to the IRS.

Hopefully, our Congresscritters won’t invent new refundable credits. Wait, isn’t there something new this year with medical care?

100 Months of Boredom

Tuesday, February 4th, 2014

The cliche, “He who lives in a glass house shouldn’t throw stones,” is the theme of this post. Let’s take Larry Hill of Rocky Mount, North Carolina. Mr. Hill had a tax preparation business. He made this YouTube video asking young people to think before they act:

Unfortunately, Mr. Hill had his own issues. From the DOJ press release when he pleaded guilty to conspiracy:

Between 2010 and 2012, HILL and his co-conspirators filed well over 2,000 federal income tax returns for HTS customers that claimed, collectively, over $14 million in tax refunds. Most of the HTS returns reported materially false information – including false dependents, income, and withholdings – in order to maximize the earned income tax credit and otherwise cause the issuance of inflated refunds. HILL and his co-conspirators pocketed a portion of every fraudulent tax refund that was issued. According to the criminal information, HILL personally collected, on average, $1,000 or more from each such refund.

Today, he found out how long he would face at ClubFed: 100 months (a little over 8 years). While Mr. Hill could have received 125 months, prosecutors asked for the bottom end of the range because he cooperated with authorities. But as WRAL reported,

The judge agreed to the lower sentence of 100 months but said Hill deserved the “most severe punishment to reflect the seriousness of the offense,” pointing out that Hill used much of the money to buy himself expensive jewelry and cars, including a Maserati. The judge also noted that Hill was on supervised release from an insurance fraud prison term when he committed the tax fraud.

Mr. Hill had emailed WRAL when his legal troubles emerged, and stated,

“He without sin cast the first stone,” Hill wrote, adding that “life would be boring” if everyone was like actor Bill Cosby.

That might be boring, but I’m betting that Bill Cosby lives an exciting life compared with the 100 months that Mr. Hill will spend at ClubFed.

He Only Got 35 Months This Time

Sunday, November 17th, 2013

There are two pieces of good news for Michael Carlow of Pittsburgh. First, he only get 35 months at ClubFed (he served eight years previously). And second, the statute of limitations expired on the IRS on $5 million of the $6.2 million in unpaid taxes, and it can’t be reinstated just because he’s in trouble with the law again.

Let’s go back to the beginning. Back in the 1990s, Mr. Carlow bought some Pittsburgh businesses that made consumer products that are associated with Pittsburgh: Iron City Beer and Clark Bar. He put himself off as a local entrepreneur rescuing local businesses. Instead, he was inflating the value of his businesses by check kiting and other bad checks. He was convicted of bank and tax fraud and spent eight years at ClubFed.

After being released from ClubFed, the DOJ states that Mr. Carlow concealed assets, filed false tax returns, and then didn’t file returns. He was accused of tax fraud; however, in a plea deal he pleaded guilty to obstructing the IRS. He received 35 months at ClubFed.

The good news for Mr. Carlow was on the financial side. The statute of limitations has run out for $5 million of the $6.2 million he owed. That said, he does owe for $1.2 million.

No Instant Replay Here

Sunday, November 10th, 2013

There’s an etiquette involved in sending emails: You don’t use all capital letters in most cases. The same is true when you write; it’s poor form. Yet when Judge Timothy Black wrote about ITS Financial, LLC (aka Instant Tax Service) he began his decision to permanently enjoin ITS from operating or being involved in tax preparation in any way with a paragraph in all caps…and in bold. Less you think he didn’t have reason to do so, well:

The evidence at trial established that Ogbazion and his Defendant companies:

Clandestinely trained and encouraged ITS franchisees to prepare and file tax returns prematurely with paycheck stubs that omitted and understated income, and inevitably resulted in the submission of false federal tax returns;

Defrauded ITS customers, who are largely low-income, by marketing false and fraudulent loan products to lure customers into franchisees’ tax preparation offices;

Defrauded ITS customers by requiring franchisees to charge phony fees, as well as exorbitant fees, of which Defendants kept an average of 18%;

Forged customers’ signatures on loan checks and used those forged checks to operate Defendants’ businesses;

Willfully failed to pay their own employment taxes, and then lied about assets in connection with the collection of those taxes, hiding money in a secret bank account, defrauding the United States and third party creditors;

Lied on government forms, and encouraged franchisees to lie on government forms, including lying on IRS applications for EFINs and on IRS Forms 8879;

Obstructed government agents and materially assisted franchisees in circumventing IRS law enforcement efforts involving the suspension of EFINs;

Told franchisees to lie to government agents in connection with IRS compliance visits; and

Violated the terms of the Order of Preliminary Injunction issued by this Court.

Joe Kristan has more on why we’ve likely seen the end of Instant Tax Service.

The Wrong Kind of Education Leads to ClubFed

Monday, November 4th, 2013

A California tax preparer decided he wanted to increase refunds for his clients. There’s absolutely nothing wrong with that–I want my clients to get the maximum possible refund allowed under the law. It appears that Kenyon Williams forgot those last three words; he was found guilty of two counts of wire fraud and two counts of aggravated identity theft earlier today.

Mr. Williams prepared tax returns in San Diego and opened his own practice in 2011. In early 2012 he called a friend in Tampa, Alesia Spivey. Here’s what the Department of Justice press release says:

Williams called his friend and fellow tax return preparer, Alesia Spivey, who lived in Tampa, Florida, and discussed the 2012 tax season and Williams’ desire to maximize refund amounts for his clients. During this conversation, Williams solicited information from Spivey regarding methods used, in Tampa, to increase tax refunds.

There’s nothing wrong with this at all–in fact, it’s a good idea to learn from others. However, there was an issue. Continuing with the DOJ press release:

Spivey and Carlista Hawls explained to Williams that individuals in Tampa were using a particular interest income scheme to file bogus tax returns with the IRS. Spivey instructed Williams on how to fill out the tax returns by employing this interest income scheme.

This is where Mr. Williams should have said ‘Thanks, but no thanks,’ and hung up the phone. Because I’m writing this I’m sure you’re several steps ahead of me: Mr. Williams implemented the interest income scheme, and filed 168 fraudulent returns. This resulted in $517,744 of bogus refunds being issued.

But it didn’t end here:

In addition, on March 2, 2012, Spivey and Hawls flew to San Diego, California to meet with Williams. During that trip, Williams provided Spivey and Hawls with a list of names, dates of birth, and social security numbers, including a stack of Navy blood donor records, to be used in preparing fraudulent tax returns in Tampa.

Thus, the identity theft charges. Mr. Williams is looking at up to 49 years at ClubFed. Both Spivey and Hawls pleaded guilty earlier this year.

Yet Another Reminder that a License Doesn’t Always Mean Ethical Behavior

Sunday, October 6th, 2013

While we wait for the Loving appeal decision to come out, yet another reminder that not all licensed tax professionals are ethical. Here, we just have allegations of fraud, so it is definitely possible that the alleged villain of the story is innocent. Nevertheless, the story is too rich to not bring up.

Anyway, from Portland, Oregon, comes the indictment of Steven Cyr. Mr. Cyr is a tax attorney. He’s been charged with two felony counts of overstating the expenses on his own tax returns (for 2006 and 2007). According to a story in Willamette Week, Mr. Cyr reported expenses of $524,678 in 2006 and $408,767 in 2007; the indictment alleges that the total expense figures are inflated. Mr. Cyr is also being investigated by the Oregon Bar.

In any case, this indictment also shows that the IRS does have means of going after tax professionals who do commit crimes. If I were to commit tax crimes, the IRS can sue me and bar me from ever preparing tax returns. They can being proceedings to revoke my license–my license comes from the federal government. If I do something truly rotten, I can be indicted for those crimes.

The idea that just because people have licenses that they will all suddenly go the straight and narrow is laughable. There were tax crimes years ago; there will be tax crimes in the years that follow…licensing or not.

Two Cases of Tax Return Preparers Committing Identity Theft

Sunday, September 15th, 2013

From the Bozo tax preparation front come two stories of preparers committing identity theft and preparing false tax returns. First, from Durham, North Carolina comes the case of Leslie Brewster. She’ll get to spend 70 months (nearly six years) at ClubFed for her part in a tax fraud scheme that occurred in the Tar Heel State.

Ms. Brewster did want to have her clients pay the least amount of tax possible. She just left out a couple of words that I use, “the least amount of tax legally possible.” She bought names and social security numbers to use on returns, and falsified hundreds of returns to get larger returns. It was the usual suspects in these cases: phony dependents, fake businesses, and incorrect education credits. She pleaded guilty to three felonies; besides the jail time, she must make restitution of $92,910.

From Atlantic City, New Jersey comes the story of Nicolas Gomez-Rua. He’ll get to spend 36 months at ClubFed for his part in a very similar scheme (to that of Ms. Brewster). Over a three-year periodf he ran a tax preparation business in Ventnor City, New Jersey. He, toom, included phony dependents, child tax and other credits to get his clients larger refunds.

But there’s more. from the DOJ press release:

Gomez-Rua admitted that he maintained a file of Social Security cards and birth certificates for individuals born in Puerto Rico that was used to add fraudulent dependents on the 1040 forms that were filed with the IRS. Clients paid Gomez-Rua on average $300 to $500 for the use of fraudulent dependents. Gomez-Rua admitted that after preparing the fraudulent returns, he filed the false returns electronically and by U.S. Mail with the IRS.

Not only did he admit that he filed 729 returns containing such fraudulent items, he also purchased another’s identity to use when he applied for U.S. citizenship. That’s another crime: Unlawfully obtaining United States’ citizenship.

Mr. Gomez-Rua’s wages while at ClubFed will go towards the $170,211 in restitution he was ordered to pay.

A reminder to everyone: If it sounds too good to be true, it probably is.

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